Oil follows Wall St lower

US crude futures fell more than 2 percent as a stronger dollar weighed and weaker equities raised concern about the economy and a potential rebound in energy demand.

US crude prices for December delivery fell $1.92 to $77.66 a barrel by 12:05 p.m. EST (1705 GMT). Brent crude for January delivery fell $1.67 to $77.80.

"Wall Street had a weak opening, which added to the pressure on crude from the dollar's moving up some," said Tom Bentz, analyst at BNP Paribas Commodity Futures Inc in New York.

Investors have scoured economic data in recent months for signs of a recovery that might boost global energy demand.

The dollar rose against the euro on Thursday, moving up from 15-month lows earlier in the week. A stronger dollar makes dollar-denominated commodities like oil more expensive for holders of other currencies and tends to pressure prices.

US stocks fell, with all major indexes down more than 1 percent on weakness in the technology and health insurance sectors.

US oil prices rose on Wednesday above the key $80 a barrel level after government data showed a drop in crude and product inventories in the world's largest oil consumer.

Crude stocks fell a more-than-expected 900,000 barrels and while distillate stocks including diesel and heating oil fell 300,000 barrels this was less than analyst projections.

FLOATING STOCKS

But analysts said mild weather in the United States and high global oil products stocks held in storage on land and on floating vessels would limit oil's potential upside.

Floating stocks of oil products, mostly distillates, are set to rise to over 97 million barrels by the end of the year, according to Reuters estimates.

"Temperatures are unseasonably mild in the United States and crude is holding the range between the high $70s and low $80s," said Peter McGuire, managing director of CWA Global Markets.

Since hitting a high of $82 a barrel in October, US prices have traded in a narrow $7 band.

On the supply side, the Organisation of the Petroleum Exporting Countries should hold oil output steady when it meets in December as current prices do not suggest the need to change supply, the head of Libya's National Oil Corporation said on Wednesday.

Implied oil volatility is the lowest since February 2008, back near levels before last year's surge to a record high.

- Reuters